Real Estate Talk:
Avoiding risk when buying
There exists a protocol to purchase property with little or no risk
By Joseph Marovitch
July 13, 2022
It is possible to search for, purchase property, and avoid risk, if you have the knowledge and discipline. Real estate is a vast and complicated process involving research, strategy, and knowledge.
Some people, who are not in the real estate profession, do know some aspects of real estate acquisition. They will touch upon the purchase of single homes, attached homes, semi-detached homes, divided condos, undivided condos, townhouses and so on.
If a buyer does not have all the knowledge required opportunities are missed, costly mistakes are made, and money and buying opportunities are lost. Therefore, it is wise for a buyer to use a knowledgeable and experienced professional broker.
However, the only way to fully take advantage of a broker’s skill and knowledge is to be able to trust the broker. There are buyers out there who do make the mistake of underestimating the real estate market and how it works. They do not realize that there are rules and protocols in place that allow transactions to be almost flawless and safe. These are the buyers who employ a broker but repeatedly make their own decisions without checking all the paths that can be taken.
It is possible to search for, purchase property, and avoid risk, if you have the knowledge and discipline.
During the past two years, buyers have aggressively searched for and purchased property recklessly due to extremely low inventory and very high demand. With low-interest rates, some buyers purchased on speculation even though they did not have the income for what they were purchasing. These are the ones who had to borrow the down payment.
Others bypassed the inspection. Bypassing inspection is a huge risk financially because, after possession, the buyer may find the house requires new windows, bricks need repair, faulty wiring, foundation cracks, water infiltration and much more. These are all issues many decided to not check and paid for later.
The sellers were not uninformed. Their brokers had the seller sell without warranty, so problems would not come back to them.
The following is the protocol to purchase with little or no risk:
- Know your budget and stick to it. Make your budget plan and disclosed to yourself and/or your broker.
- In your search for homes, stick to your criteria of location and needs. Location and needs are moving parts, and as they change, so does the budget.
- Upon a visit, either love what you see or know the potential and if it can meet your needs and budget.
- Fully understand the differences, advantages and disadvantages, both financial and physical, between single homes, detached homes, semi-detached homes, attached homes, undivided and divided condos, townhouses and more.
- In the promise to purchase, include all required conditions such as a review of expenses, inspection, and financing.
- Have a proper inspection by a qualified and experienced inspector. Inexperienced inspectors should be accompanied by experienced inspectors.
If a buyer, after their due diligence, finds the property in satisfactory condition, the expenses acceptable, and there are no outstanding issues that conflict with city bylaws, then they can proceed to the notary. If the property requires significant repair or expenses are much higher than anticipated, they can either renegotiate the price or cancel the offer.
‘If a buyer… finds the property in satisfactory condition, the expenses acceptable, and there are no outstanding issues that conflict with city bylaws, then they can proceed to the notary.’
There is more to this, but if the protocols are followed, a buyer will stay out of trouble. There is nothing worse than swimming in a sea of expenses up to your neck with a chance you may stay above water.
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Next article: Where the opportunities are in a bumpy market
State of the market
Does it ever feel like the federal bank is guiding a spaceship faster and faster through a meteor shower of war and politics with interest rates as a space gun in an attempt to find a safe place to land? Well, today, the fed raised interest rates by a full basis point to 2.5%. As well, the fed intends to continue with sharp interest rate hikes until spending is curbed, and inflation drops. We will likely end up in a recession.
With rising interest rates, we see fewer buyers and more property. If you have the cash, opportunities are coming to purchase at a reasonable price. If a buyer does not have a pre-approval at this time, it is advisable to put down as much cash as possible and avoid paying the higher interest rates.
‘With rising interest rates, we see fewer buyers and more property. If you have the cash, opportunities are coming to purchase at a reasonable price.’
This forceful driving of interest rates is due to inflation now at 7.7%. The federal bank believes inflation should level off at 8% and then begin to fall in late 2022. Between now and then, we are all on a bumpy road with high borrowing costs and the rising cost of goods and services.
I am sure there is an opportunity somewhere in this global mess for someone.
Have a great week, and stay safe.
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Feature image: Anna Shvets, by Pexels
Other articles by Joseph Marovitch
Joseph Marovitch has worked in the service industry for over 30 years. His first career was working with families from Westmount and surrounding areas, hosting children between the ages of 6 to 16 as the owner and director of Camp Maromac, a sports and arts sleep away summer camp established in 1968. Using the same strengths in caring for the families, such as reliability, integrity, honesty and a deep sense of protecting the interests of those he is responsible for, Joseph applies this to his present real estate broker career. Should you have questions please feel free to contact Joseph Marovitch at 514 825-8771, or email@example.com
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